By Jon Swartz
SEATTLE — Twenty years ago, Amazon.com Inc. was an online bookstore that was powered by the same servers and systems that other companies used.
In trying to expand beyond books, Amazon /zigman2/quotes/210331248/composite AMZN +0.70% developed a new way to power its website, pushing it to the most important e-commerce site of the new millennium. In doing so, it developed Amazon Web Services, as well as the entire concept of cloud computing as an industry, which may go down as the most influential breakthrough Amazon has managed.
Launched the year before Apple Inc. /zigman2/quotes/202934861/composite AAPL -1.16% introduced the iPhone, AWS has changed technology in a similarly outsize way. Apple cemented the mobile age, but it was Amazon that ushered in the cloud era, which has changed the way businesses use technology in the same extreme way that smartphones have changed consumers’ tech habits.
From a 22nd-floor conference room in re:invent, one of three Amazon towers overlooking the Seattle skyline, AWS executives with more than 30 collective years in the division recently gathered to discuss exclusively with MarketWatch how Amazon Web Services grew from a germ of an idea to a fledgling division to what is now Amazon’s fastest-growing source of revenue, and most important and stable profit source.
It’s the story of a project designed to solve a software and database system that at the time limited the e-commerce pioneer to selling books. Beyond spurring Amazon to incredible growth beyond books, AWS blossomed into an industry-shifting technology that lets companies rent computer power and offers tools to businesses and other organizations over the internet.
“I don’t think any of us had the audacity to predict it would grow as fast as it did,” AWS Chief Executive Andy Jassy said in a fireside chat in France in June.
The success of AWS has created a multibillion-dollar cloud market that Amazon still clearly leads, but the growth has attracted deep-pocketed rivals such as Microsoft Corp. /zigman2/quotes/207732364/composite MSFT -1.08% and Alphabet Inc. /zigman2/quotes/202490156/composite GOOGL -0.05% /zigman2/quotes/205453964/composite GOOG -0.03% . As AWS prepares to host the largest cloud-computing conference in Las Vegas this week — also named re:Invent — it faces more challenges than ever, as rivals now seek to siphon off significant portions of a cloud-computing market that AWS created from scratch.
In the beginning
The roots of AWS extend back as early as 2000, when Amazon was an e-commerce company coping with scale problems. As it attempted to add new applications to serve its retail customers, Amazon was hamstrung by “monolithic” software and sets of databases that, as Chief Technology Officer Werner Vogels put it, required rewriting swaths of computer code.
Amazon began to splinter its three largest data sets — customers, goods and orders — into separate items that, in turn, were broken down into smaller units, such as login information or security requirements. At the same time, Amazon began offering computer systems and tools, such as renting IT infrastructure and applications online to other tech ventures, so they could sell their own products via Amazon.com.
Moving to that type of structure allowed Amazon customers to outsource their computing needs — be it storage, servers or networking — on a pay-as-you-go basis. “That was the driver for what later became AWS,” Vogels said.
“Very quietly around 2000, we became a services company with really no fanfare,” Jassy has said.
The timing was precipitous — as more companies began to look to store vast troves of data and computing power, Amazon was pouring billions of dollars into research and development. What became AWS first surfaced in 2004 and officially launched in 2006, with its first cloud products Simple Storage Service (S3) and Elastic Compute Cloud (EC2), and by 2015 it was bringing in nearly $8 billion a year.
Amazon wasn’t just the first to market with a modern cloud infrastructure service: It built on its product with applications for robotics, artificial intelligence, machine learning and a phalanx of databases.
Consider: DeepLens gives developers a view of machine learning via a fully programmable video camera. The RoboMaker app helps companies develop and deploy robot control systems. (The code name for AWS’s robotics effort was B9, after the iconic robot in the 1960s TV series, “Lost In Space.”) The Database Freedom program helps customers shift from traditional database engines to cloud-native ones on AWS. Special-purpose hardware like AWS’s Snowmobile data-storage boxes can move petabytes of data.
“Ten years ago, [Amazon CEO] Jeff [Bezos] and Andy [Jassy] understood [machine learning] would transform Amazon in a big way,” Swami Sivasubramanian, vice president responsible for artificial intelligence and machine learning at AWS, told MarketWatch.
“Historically, [machine learning] has been hungry for compute infrastructure and data, but it was not accessible for most companies,” said Sivasubramanian, who as a research intern at Amazon in the early 2000s saw the potential of the cloud-computing concept. “AWS is making it accessible.”
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Shawn Bice, vice president in charge of database business, added that AWS’s full embrace of specialized databases has eased the ability of customers to adapt quickly, and easily, to the cloud.
To deliver customers the computer capacity necessary for AI, data analytics and other advanced technologies, Amazon has assembled a network of new data centers in more than 20 geographic regions.
Forrester estimates AWS spends billions of dollars each quarter building new data centers or expanding existing ones. Few cloud vendors can match Amazon’s spending, according to Forrester.